Orange County FHA, VA & First Time Buyer Loan Information: Extension on First Time Buyer $8,000 Tax Credit is on Horizon for Orange County Home Buyers

My goal is to provide valuable information for home buyers, both First Time Buyers and Move Up Buyers. This information will be about loan programs such as FHA ,VA, Conventional Fannie Mae and Freddie Mac, Reverse Mortgages, and even Portfolio Jumbo programs. I will also touch on tax advantages of homeownership, Rent vs. Own analysis, and any other aspect of loans and home ownership that will be of interest to Orange County home buyers and homeowners.

On November 4 the Senate voted to extend to First Time Buyer Tax Credit, which would be a big boost for Orange County home buyers. The current tax credit program is set to expire on November 30, 2009. Deals that are currently in escrow are "under the gun" to close by the end of the month. That is a scary proposition, considering the delays that cause many escrow to close late. Throw in Thanksgiving cutting into the last week of the month, and there couldn't be a worse time to end a Tax Credit program that many buyers are counting on.

A Few More Steps Remain Before the Extension is Official

The Senate has unanimously passed the bill that would extend the Tax Credit. But what now? It needs to go through the House, which is expected to happen today, November 5. Once through the House, Obama will need to sign off on it, which should happen quickly. So hopefully it will be official in the next few days.

Expanded Tax Credit Provisions

The current tax credit provides up to an $8,000 Tax Credit to First Time Home Buyers. A First Time Buyer is someone who hasn't owned a home within the past three years. The credit is equal to 10% of the purchase price or $8,000, whichever is less. For Orange County home buyers, that essentially means they get the full $8,000 credit since there aren't many (any?) homes less than $80,000. There are income restrictions however, that have precluded some high earners from the credit. For one person households, the full credit could be claimed if the person's income was under $75,000. There is a phase out up to an income of $95,000. For married couples, the phase out begins at $150,000, with the credit hitting $0 at an income level of $170,000.

New Income Limits for Expanded Tax Credit

Under the provisions for the new bill, the credit doesn't begin to phase out until $145,000 for individuals, and $245,000 for joint filers. There have been First Time Home Buyers in Orange County who have not been able to take advantage of the tax credit because of their high incomes. These new higher limits should include nearly everyone who is looking to buy a home.

A credit of up to $6,500 would be available to move up buyers, which was not part of the old tax credit program. While this may help somewhat, the biggest issue for move up buyers has been a lack of equity in their current home. This is where programs like FHA can come into play. An Orange County move up buyer can purchase a home for $750,000 with only 3.5% down payment using an FHA loan. That is only a $26,250 down payment. It doesn't take much equity to make that work. For those Orange County VA loan eligible home buyers, they are able to purchase a home for $737,500 with $0 down.

New Deadline Date for Orange County Home Buyers

The new deadline date for the tax credit will be April 30, 2010. Even better is that the sales contract just has to be signed by April 30. The buyer will then have 60 days to close, which should be plenty of time for a typical transaction.